[Christopher Fraser in the Chair] — Manufacturing and Employment

Part of the debate – in Westminster Hall at 10:10 am on 9 June 2009.

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Photo of David Drew David Drew Labour, Stroud 10:10, 9 June 2009

I note the desire of my hon. Friend Tony Lloyd to speak and congratulate my hon. Friend Mr. Hoyle, who put the case admirably. I am delighted to speak under your chairmanship, Mr. Fraser.

I shall concentrate on the key issue of the wage contribution, subsidy or whatever we want to call it. It might surprise people to know that Stroud is a manufacturing centre. Many people think that it is an area of agriculture, green hills and tourism. In fact, a disproportionate number of people—more than the national average and certainly the highest number in Gloucestershire—work in manufacturing, particularly engineering.

Our firms are mainly automotive or in the automotive chain—although some are aerospace—and they are experiencing some difficulties at the moment. The aerospace sector has, of course, lagged behind other sectors in terms of the recession, but, nevertheless, it faces some difficulties. I have been to all my major firms—Renishaws, Delphi, SKF, Lister-Petters and a smaller company called Deutz. In addition, I am in Cologne next week to try to fight to retain 30 jobs, which I think we can do if the parent company allows its subsidiary in Dursley to go it alone and work with Lister-Petters, which was the original company. That would provide an answer, and it is my duty to work towards such a solution. It is not all bad news: an ABB plant in my constituency is doing very well, because it is based in the water and power industries. The way in which ABB locks into those industries means that it is doing relatively well.

On wage subsidy and wage contribution, I must compliment the Government. Two of the firms that I have mentioned—Delphi and Renishaws—have laid off a large number of people. For Renishaws, that is unheralded. That company is a state-of-the-art probe manufacturer under the chairmanship of Sir David McMurtry, who is one of the stars of Britain and British industry. However, between December and January, Renishaws hit a wall because of what happened to demand for machine tools, of which probes are a key element. As well as the lay-offs, people have "volunteered" to go on short-time working to keep their jobs. However, accordingly, they will take the pain of the loss of money and the sacrifice that comes with that.

I went to see both Dephi and Renishaws early in the new year when they hit these problems. We agreed collectively that when people are on short-time working, their time can be used meaningfully to boost their skill level and that we should ensure that people can do the training that they would love to do but that they are normally too busy to contemplate. I pay due regard to a number of Government agencies that have been key to those discussions, such as the South West of England Development Agency, the Learning and Skills Council, Jobcentre Plus, Gloucestershire First—our local development agency—and Gloucestershire Training Group Limited, which will undertake the training provision. As my hon. Friend the Member for Chorley has said, the trade union, Unite, has also been crucial in encouraging its members to go along with the training.

Using Train to Gain, we have put training packages in place so that slack time can be taken up and that people can be usefully employed. There are two reasons why we have done that. First, as I have said, it is important for people to build up their skill level. Secondly, when we get out of recession, we have to be absolutely tooled-up, skilled-up and personed-up, because otherwise our competitors in Europe will take the work. The two firms that I am talking about are Renishaws and Delphi. Delphi has a huge order book going forward, but, of course, no one is taking up those orders at the moment. Renishaws is much more of a just-in-time business, but, again, it will be back because it is the world's leading manufacturer of highly skilled probes. We have a future; those firms have a future; however, we have got to get to that future.

As my hon. Friend the Member for Chorley has said, I commend the paper produced jointly by the Federation of Small Businesses and the TUC. I shall not discuss that document in detail, because I know that my hon. Friend the Member for Manchester, Central wants to speak. However, it is a very pertinent paper, which also has the benefit of being short, and it makes the point that such training schemes mean that firms are keeping people on their books. Of course, firms have the means to do so, because employment schemes involve a levy on companies, so that money is available to allow companies to keep people on the books while the state pays them in times of downturn. I am not suggesting that we go along all the way with that, because it is rather quaint to pay people to lie on the beach for three months at a time. I would much rather people were working and being trained when they are not working, so that they are appropriately skilled for when they come back.

As my hon. Friend the Member for Chorley has said, if we consider Wales, such schemes are not unique in our country. The Minister might have an interesting point of view on this because, under the ProAct strategy, such schemes are taking place in Wales, where people are being paid wage contributions to undertake training. Wales has led the way on that and the rest of the United Kingdom must follow.

Of course, smaller companies can already pay a training subsidy under Train to Gain. Again, that is nothing new. During the 1970s, to which people sometimes hark back, there was a temporary employment subsidy. Such schemes are nothing new; we have done it before and we must do it again. Why? Well, the alternative is to lay people off, which will cost. I know that there is a cost associated with such training schemes—the figure of £1.2 billion has been bandied around, which is the figure in the FSB and TUC paper—but it is not an absolute cost because people would go on to jobseeker's allowance and draw down all sorts of other benefits. Therefore, I would like the Government to cost such schemes. I know that I am arguing with my hon. Friend on this, but I would, at least initially, limit such schemes to the automotive industry, and then see how long the recession lasts. This is a short-term measure. We are not talking about it being indefinite because, of course, we hope that the recession will not be indefinite. It is a short-term measure, but, nevertheless, we need to take it.

I have some specific questions for my hon. Friend the Minister. I am eternally grateful for the Delphi-Renishaws package being put together, but the ghost in the room—if I can put it that way—that has not been dealt with is the need for a wage contribution. The Delphi-Renishaws scheme is taking place on a per person basis, and one issue is the upfront costs of the awarding body. Those costs should be removed or at least scaled down, because there will potentially be—we would like to see this—at least 300, 400 or perhaps even more workers undertaking the upskilling to get national vocational qualification levels that they have not previously managed to achieve.

Secondly, there is the question of what happens when someone drops out of the scheme. At present, the full cost is borne by the company. As that is something that companies in difficulty always worry about, we hope that there will be some flexibility so that the company does not have to bear the full cost of people leaving, for whatever reason, whether it is another job, family illness or so on.

Thirdly, apprentices are key to the scheme. Both companies have committed themselves to taking apprentices this year and next year, because they feel that that is the future. At present, the use of European social funding for those under 18 is not allowed, so we wish to have flexibility to include under-18s.

Finally, setting up such schemes is expensive; it requires a big budget. We want some clarity that they can continue in the future, because, whatever we do to begin with, we will want to roll it out. I would like other firms to join in and follow that model, which is exciting, innovative and absolutely right. Those are my specific questions.

In conclusion, I think that what we are trying to do in my constituency is absolutely right, but we do not want to be hung up on or hamstrung by the question of whether a wage contribution will be paid. There is a matter of justice: if the state is asking people to use their time and money to undertake such a scheme, the least it can do is make a contribution as they do so. We will get a benefit, as our firms will be even more competitive when they come out of the recession.

I hope that my hon. Friend the Minister hears my earnest pleas. I am grateful to the Government for putting enormous resources into supporting employment. I know that the scheme is a pioneer project, a pilot—it is pushing forward the boundaries—but, as I have said, the problem is not new. If we can crack this, other parts of the country and other companies can learn from us, but we need clarity about whether a wage contribution for the automotive industry is a possibility, albeit for a short period of time, because it would help everybody. We will push on with our plans regardless, but we really need that back-up.